Employee Dishonesty Coverage
Insurance protection that covers financial losses when employees steal money, securities, or property from their employer through fraudulent or dishonest acts. This coverage, also known as fidelity coverage, protects businesses from internal theft committed by their own workers.
Example
“The bookkeeper had been skimming cash receipts for two years before being caught, but the company's Employee Dishonesty Coverage reimbursed them for the $85,000 theft.”
Memory Tip
Think 'Inside Job Insurance' - it protects against dishonest acts by people on the inside.
Why It Matters
Employee theft costs U.S. businesses billions annually, and small businesses are particularly vulnerable since a single incident can be financially devastating. This coverage provides crucial protection against trusted employees who abuse their access to company assets.
Common Misconception
Business owners often assume that general liability or property insurance covers employee theft, but these policies specifically exclude dishonest acts by employees. Only dedicated Employee Dishonesty Coverage protects against internal theft and fraud.
In Practice
A retail store manager steals $25,000 over six months by processing fake refunds and pocketing the cash. The store discovers the theft during an audit and files a claim under their $50,000 Employee Dishonesty Coverage. After a $1,000 deductible, the insurance pays $24,000 to reimburse the stolen funds, preventing the small business from suffering a significant financial loss that could have forced closure.
Etymology
The term 'fidelity' coverage dates back to the early 1900s when surety companies began offering bonds to protect against employee theft, with 'fidelity' referring to faithfulness and loyalty.
Common Misspellings
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Related Terms
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